Lockheed Martin Corp (NYSE: LMT) has posted their earnings results for Q4 2019.
Revenue came in at $15.87 beating analysts’ estimates of $15.28 billion (+3.86% vs estimates).
EPS came in at $5.29 which beat analysts’ estimates of $5.03 (+5.17% vs estimates).
Overall, it’s a great time to be a Lockheed Martin shareholder. The stock is at its 52-week high at the moment, increasing from around $280 per share to sitting at just over $440 a share pre-market today after the Q4 results (~+57% since January 2019). These huge gains are on top of a dividend that has grown for 17 years straight and is currently sitting at a forward yield of 2.22%.
The American-Iranian Conflict Has Given the Stock a Huge Boost
We began the new year with news that President Trump ordered the assassination of Iranian General Qasem Soleimani. This news has led to increased global tensions and has greatly helped defense stocks like Lockheed Martin. The day the news came out, Lockheed Martin stock surged over 3%. The increased tensions between Iran and the U.S. is unlikely to subside anytime soon, as Iran retaliated soon after General Solemani’s assassination by firing missiles at U.S. forces bases. The longer this conflict continues, the longer the run-up in stock price in LMT may be.
Lockheed Martin is at a Slightly Richer Valuation Compared to its Peers
Looking at the forward P/E ratio of LMT, we see that it is slightly higher than many other U.S. defense contractors. However, it can be argued that LMT deserves to trade at a slightly higher valuation considering they delivered an earnings beat 3 out of the last 4 quarters with the previous quarter (Q3 of 2019) delivering a EPS beat of 12.0% and a revenue beat of 2.1%.
There May Be Many More Catalysts for Growth Coming Soon
Recently, the Polish National Defense Minister has announced that Poland will sign a contract to purchase 32 fifth-generation F-35 fighter jets in a deal valued at $4.6 billion. This is good news for LMT as they manufacture the F-35 fighters.
These new contracts come despite the fact that the product line has been plagued with problems and delays and has ran wildly over budget for over a decade. These new contracts are a demonstration of LMT’s competitive advantage as the sole proprietor of state-of-the-art defense technology that would be extremely difficult for other companies to replicate.
The 2020 U.S. Presidential Elections in November will be interesting to watch especially for shareholders of defense contractors like LMT. If Trump is re-elected, it could send the stock soaring even higher, as Trump has regularly preferred more hawkish stances on matters of global politics and advocated for higher spending on defense.
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